The photo above may look yummy, but once you get behind the metaphor it isn’t so appealing anymore.

What is the sandwich generation? Basically it’s the people who are financially caring for their retired parents while they are also financially providing for their children. In other words, they are financially “sandwiched” between two generations that can’t provide for themselves. It’s a relatively new term, which just made its way to the Merriam-Webster Dictionary in 2006. Though the term originated in the US, it’s a common phenomenon here as well.

But how does this happen?

First, most retiring Filipinos aren’t financially independent. According to a recent study by Sun Life, 45% of retirees become a financial burden to their relatives, 30% are dependent on charity, and 22% continue to work even after retirement.

Our culture’s attitude doesn’t help either. We feel compelled to repay our “utang na loob” to our parents, even if it’s more than we can afford. It doesn’t stop at parents either – sometimes you will be socially pressured to help out your “less fortunate” relatives, even if some of them fell into misfortunes that they created for themselves (such as excessive gambling, lack of will to find employment, etc.)

At the same time, it’s you will have to provide for your own children. Everyone knows that raising children can be expensive, especially if you want to provide them with the best medical care or send them to the best schools.

Now, the sandwiched person may earn enough to pay for both the needs of their parents and their children, but there’s often a cost to this. Usually, they don’t earn enough to also set aside money for their own retirement. At this point, it becomes a cycle and their children are doomed to feel “sandwiched” too when they become adults.

Breaking the Cycle

Here’s the sad thing: I know that when I have children, I will be part of the sandwich generation. But I don’t want it to become a cycle. When they grow up, I want them to worry about their own needs and even have the money to enjoy themselves a little more. I do not want to burden them.

There’s little that a sandwiched person can do for their parents if they are already retired. Maybe you can improve their health care coverage and set up an emergency fund for them. But if they live long lives and have no money for retirement, they will be financially dependent on you for a decade or two.

As for your children, there are ways to prepare for them financially. My partner and I will be saving up a certain amount as a “children’s fund” for our future kids so that we can pay for all the financial emergencies that come up within the first two years of having children. These include visits to the doctor, immunization, diapers, clothes, and other needs.

There are also educational plans, insurance, and other available vehicles that will allow you to plan for your children better. By having the money for your children before they arrive, you’ll be saving yourself from debt and a whole lot of headaches.

In other words, the key is to make a financial plan before your parents retire and before your kids arrive. Create a spending plan and account for major expenses. This will put you in a better position that will equip you to handle expenses for both parties.

More importantly, you need to earn more. Only by increasing your income can you also set aside enough money for yourself when you retire. After all, who wants to have their children go through the same problems and unnecessary stress?

Are you part of the sandwich generation? Feel free to share your experiences with other readers in the comments.

Image by topfer from sxc.hu

This is Day #22 of “25 Days to Healthier Finances”, a series of blog posts where Frugal Pinoy readers and myself work on 1 task a day to make our financial lives better. Please stay tuned for the next installment of this series, which will be up tomorrow. Here’s today’s installment:

For most people, it’s taboo or bad manners to talk about money. But sometimes, not discussing money properly leads to even deeper problems. For example, married couples often disagree on their financial status. In one survey, 86% of couples admitted that they regularly fought over money. Another survey revealed that more than 2/3 of Americans learn about money management from home rather than school. Whether we like it or not, discussing money with others has a significant impact on how we perceive or handle it.

Today’s Task: Discuss finances with a friend or relative.

Your discussion doesn’t have to be deep or complex. Here are some examples of some simple starting points:

• Ask an older relative what they wish they started saving up on when they were your age.
• Give your kids glass jars where they can collect loose change and tell them why doing this is important.
• If you’re interested in starting your own business, you can ask advice from a friend who has done it before.
• Ask your parents what they wish their parents taught them about money.
• Go on your social networking sites (Facebook, Friendster, Multiply) and make a post about how you’re interested in learning how to manage your money, invest, or whatever aspect of personal finance you’re most interested in. Ask openly if your contacts have any books or blogs to recommend.

Of course, before you start any conversation about money, assess your relationship with the person first. How close are you? What do you expect to gain from the discussion? Have you discussed finances in the past? If you’re having trouble gauging their comfort level , keep these pointers in mind:

• People are more open to discussing things like cost of living (bills, rent, etc.) and budgeting/planning methods rather than specific price tags on purchases or how much their salary and savings are. Ask “how” rather than “how much”. “Do you know a cheaper grocery store or market nearby?” is better than “How much do you spend on groceries each month?”
• Friends and relatives in the finance sector tend to be more open about these kinds of discussions, so if you have a close friend who works in that field, talking to them is a good start.

Why is this important?

For me, talking about money – especially with my partner – is an exercise in getting real. It allows me to express and evaluate my ideas about what money is and how I treat it as a resource. Without my regular discussions with my partner, I might not be as disciplined about managing my money well. Also, doing this can be a learning experience. I have some friends that I ask financial tips and advice from. They allow me to see things in new ways that I haven’t explored before. It’s certainly much better than keeping all your thoughts and ideas inside without the input of others.

How often do you talk about money? What is your experience with talking to your spouse or parents about it?

Image by pfiesta from sxc.hu